Month: July 2008

Senate Chicken on Funding Bill

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The Republicans, having a phony issue, the kind that they like best, that they think that they can run with, offshore drilling, have vowed to block everything until they get a vote on the issue.

Well, it looks like the Dems are calling their bluff, and daring them to block a troop funding bill which includes:

  • A 3.9% across-the-board pay raise for military personnel
  • A funding increase for research into traumatic brain injury treatment
  • Funding increase fortroop suicide prevention efforts
  • A $26 billion for the Defense Health Program
  • A $500 million for Mine Resistant Ambush Protected (MRAP) vehicles.

Why does the Republican party hate the troops?

The Banks are Pulling a Fast One Here

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I’m just not sure what.

I’m checking the Bloomberg financial news, and I come across this story, all of two paragraphs, about conducting all the trades for credit default swaps through a clearinghouse of some kind.

Some of the names that planning to do this are, “JPMorgan Chase & Co., Deutsche Bank AG and Morgan Stanley,” and the article further goes on to state that, “The clearinghouse would be designed to absorb losses in the event a major market-maker fails.”

Considering the value of the CDS market, which is roughly equal to that of world GDP, I gotta figure that something bad is heading down the pipeline, and that the big players are looking to offload it onto either stupid investors and/or the taxpayers.

Can anyone translate this into meaningful English?

What are the Banks Hiding?

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The Financial Accounting Standards Board (FASB) just postponed a rule that would require that off balance sheet entities* onto their books for one year.

They were getting a lot of pressure from banks and their allies on Congress about this.

The question is: what are they hiding, and at least part of the answer is:

Many lenders made profits in the run-up to the subprime- mortgage crisis by selling pools of loans to off-balance-sheet trusts known as qualified special purpose entities, or QSPEs, which repackaged the pools into mortgage-backed securities. Some banks then sold those securities to other off-balance-sheet vehicles they sponsored, such as so-called asset-backed commercial paper conduits.

*Things like “mortgages and credit-card receivables.”

Bankruptcies and the Birth/Death Adjustment

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When generating employment numbers, the Bureau of Labor Statistics (BLS)uses something called a Birth/Death adjustment, which is supposed to account for small new businesses that it misses in its surveys.

Well, the always quotable Barry Ritholtz has a question, is anyone at the BLS looking at the “death” part of the model?

Specifically, commercial bankruptcies are up 45%, but the BLS is still using their Birth/Death model to increase employment numbers.

Waxman Looking to Take Out Blackwater

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Henry Waxman (D-CA) is Blackwater International’s misrepresentation of itself as a small business to get contracts.

If fraud can be shown, they could be declared ineligible for future government contracts, which would, thankfully, put them out of business.

As Waxman explained in a memo (PDF) accompanying the launch of the three investigations, they each hinge on Blackwater’s self-classification of its workers as contractors rather than employees. Waxman argues that classifying security personnel as contractors has allowed Blackwater to apply for small business contracts for which it wasn’t eligible, underpay income taxes and workers benefits, and avoid complying with DOL anti-discrimination requirements for federal contractors.

As useless as Pelosi is sometimes, it’s good for Waxman to have subpoena power.

DDG-1000 Cancellation to Figure Prominently in Maine Senate Race

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The US Navy has proposed ending production at 2 Zumwalt class DDG-1000, and making up the difference with additional DDG-51s, and incumbent Republican Susan Collins opposes this while Democratic challenger Tom Allen supports it.

The total amount of dollars from the Navy would be similar, but the Burkes have more local content, as the Zumwalts are made from modules from all around the country (the better to spread the pork around to many Congressional districts)and then assembled at Bath Iron Works, so the Burkes mean more money for Maine, which should be a selling point for Allen.

Air Force Looks to Escalate in Iraq

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If there is anything to be learned from the disastrous counter-insurgency experiences in Iraq and Afghanistan, it is that the use of air power must be kept to a minimum, because the collateral damage crates more supporters for the insurgents.

Of course, this bit of knowledge appears not to have registered with the USAF, which is looking at an expansion of its role as US troops draw down.

This is why we need to be completely out. Every bomb we drop risks creating anothere Osama bin Laden.

Trent Lott May Be Involved in Witness Tampering

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It’s tied into the Ricky Scruggs case, and a deposition where Zack Scruggs, Lott’s nephew, took the 5th in response to the question, “Has it been your custom and habit in prosecuting litigation to have Senator Lott contact and encourage witnesses to give false information?”.

It’s nice that Scruggs and Lott got along so well…I would have figured some tension, as Scruggs was a big Democratic Party supporter in Mississippi.

Economics Update

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Well, we have a big bit of information to lead with today, it turns out that the revised GDP numbers for the 4th quarter of 2007 show a contraction of 0.2% in the economy, which means that as numbers come in, that might very well be the start of the economy, particularly given the fact that the inflation numbers used to generate “real” GDP growth are bogus.

According to the most recent figures, the US economy grew in the 2nd quarter of 2008, but it grew less than forecast, 1.9% as versus 2.3%, but given what happens in revisions, I expect the number to get worse over time.

Employment is grim too, with weekly jobless claims up 44,000 to 448,000, though part of this is the effect of people going back on unemployment because of the 13 week extension.

While the weekly number is noisy, the trend has been toward increasing unemployment, and I agree with Calculated Risk, “Labor related gauges are at best coincident indicators, and this indicator suggests the economy is in recession.”

That’s not to say that there is no data pointing in the other direction, as the Chicago Purchasing Managers’ Index Increased to 50.8, and any number above 50 points toward expansion.

That being said, the currency market saw the clouds, not the silver lining, with the dollar falling, though the fact that Euro zone inflation hit an all time high of 4.1%, which points toward rate increases by the ECB, could be a factor in there too.

In real estate, mortgage rates fell this week, which is probably an artifact of the reduced inflation fears from moderating oil prices.

The bit I found interesting though is that Freddie Mac is doubling the payments it makes to loan servicers for foreclosure prevention activities, which strikes me as a sort of a “hail Mary” play to keep more of their mortgage backed paper from going bad.

And our old friend, “The trouble with the monoliner insurers,” is back, with Financial Guaranty Insurance Co. (FGIC) being cut to junk bond status by Fitch.

In energy, both oil and gasoline are down.

Finally, a reason, as if you needed one, not to watch the Fox Business Chennel:


This just buggers the mind.

McCain Loses St. Petersburg Times (Florida)

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From ‘straight talk’ to smear campaign.

I see a parallel between 2008 and 1992, where the press realized how badly they were played by GHW Bush against Dukakkis in 1988, and were careful not to be played again in 1992.

Maybe I’m just an optimist though.

On a related note, John Weaver, who has been a close friend and confidant of McCain for years, is denouncing his current ad campaign as childish, “There is legitimate mockery of a political campaign now, and it isn’t at Obama’s. For McCain’s sake, this tomfoolery needs to stop.”